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There is an increasing trend by

regulators to place responsibility

on auditors to report separately to

a regulator on detailed schedules

of information underlying an audit

of financial statements without

performing a separate audit

or review with respect to these

schedules. Often these schedules are

prepared to meet the requirements of

regulations that include terminology

that is not precisely defined and may

require significant interpretation.

These schedules are used only for

regulator’s statistical purposes and

are not considered to be prepared

to meet the common financial

information needs of a wide range

of users. Accordingly, a regulator

does not require assurance on these

schedules in accordance with the

IAASB’s Engagement Standards

and, in fact, only wishes to know

that the information appearing on

these schedules was extracted from

the information that was subject to

the audit of the financial statements

as a whole (in accordance with

the applicable financial reporting

framework), and meets the

requirements of the applicable

regulation. The regulator is seeking

credibility, but not assurance.

There appear to be at least two

issues for the auditor:

In terms of which standard is such

an engagement undertaken; and

The auditor’s responsibility for

significant interpretations of


These issues appear particularly

relevant to the auditor reporting

to the Registrar of Pension Funds

on whether Schedule IB

Assets of

the Fund held in compliance with

Regulation 28

has been prepared

in compliance with Regulation 28 of

the Pension Funds Act, following an

audit of the financial statements of

a retirement fund (‘the Fund’), and

included in the regulatory return to

the Registrar.

It seems that some auditors are

issuing a form of disclaimer based

on their inability to apply significant

interpretations of Regulation 28,

while other auditors recognise that

such a disclaimer is inappropriate,

especially when an unmodified

opinion has been expressed on the

financial statements as a whole.

Further, such auditors recognise that

a disclaimer is of no assistance to the

Registrar in exercising its function as

a regulator. In such circumstances



of the return are

required to record their relevant

interpretations of Regulation 28 by

way of notes in Schedule IB, and



determines whether it is

possible to report compliance with

Regulation 28 on the basis of those


The Independent Regulatory Board

for Auditors (the IRBA) has met

with the Financial Services Board

(the FSB) and agreed the following

transitional arrangements, pending

the development of local guidance:

1. There is no reporting standard

at present in South Africa that

provides guidance for auditors

in such circumstances. However,

it is recognised that an auditor

who has conducted an audit of

the financial statements should be

able to report, in some way, on

the extraction of the underlying

information from the accounting

records that were the subject

of the audit engagement, in

compliance with Regulation 28.

2. Interpretation issues in the

application of Regulation 28

are the responsibility of the



not the auditor.

The preparer should prepare

Schedule IB in compliance

with Regulation 28 and any

interpretation guidance issued

by the FSB or National Treasury.

The FSB has undertaken to

communicate to the Boards of

Funds that the preparers are

required to include notes in

Schedule IB explaining their

interpretations of Regulation 28

that have been applied in the

preparation of the schedule.

3. The auditor states in an

introductory paragraph of

the auditor’s report that the

information contained in

Schedule IB has been extracted

from the Fund’s underlying

accounting records, that were the

subject of the audit engagement

on the annual financial

statements, and forms the subject

matter of the engagement to

report on compliance with

Regulation 28. The auditor

also states that the audit of

the financial statements of the

Fund for the year ended 20XX

was conducted in accordance

with International Standards

on Auditing and in the auditor’s

report the auditor expressed

an unmodified opinion on the

financial statements prepared,

in all material respects, with

the Regulatory Reporting

Requirements for Retirement

Funds in South Africa.

4. The auditor reports on whether

the auditor has determined that

Schedule IB has been prepared

in compliance with Regulation

28, based on the auditor’s work

performed. When the auditor has

made a positive determination,

the auditor states that the

auditor’s determination has

regard to the interpretations of

Regulation 28 by the preparer as

recorded in Schedule IB. When

the auditor has made a negative


details are given

of any non-compliance that

came to the auditor’s attention

or of a disagreement with an

interpretation or of doubts about

the interpretation of a particular

requirement of Regulation 28

by the preparer as recorded in

Schedule IB.

5. The auditor’s report, which is

addressed to the Board of Fund,

is restricted as to its distribution

and use (to the Board and the


Issues to be considered by auditors when reporting

on supplementary information to Regulators

Derek Spavins


087 940 8820


087 940 8876